Epigral Limited (EPIGRAL) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm [ Celsia ] moderator for the conference call. Welcome to Epigral Limited Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Mr. Rohit. Thank you, and over to you, sir.

Thank you, [ Celsia ]. Good evening, everyone. Thank you for joining us on Epigral Limited Q3 FY '24 Results Conference Call. We would like to thank the management for giving us this opportunity. On this call, we are joined with Epigral's management represented by Mr. Maulik Patel, Chairman and Managing Director; Mr. Kaushal Soparkar, Executive Director; Mr. Sanjay Jain, Chief Financial Officer; and Mr. Milind Kotecha, Investor Relations. I would like to invite Mr. Maulik Patel to initiate the proceedings with his opening remarks, post which, we will have a Q&A session. Thank you, and over to you, sir.

Thank you, Rohit. Good afternoon, everyone, and welcome to the call to discuss Epigral's quarter 3 FY '24 performance. I believe you had an opportunity to view the earnings presentation that was released earlier today. Chemical industry continued to be under pressure in quarter 3 FY '24 as well. Destocking is still continued and the demand from certain industry was low in the quarter. We believe current scenario is short term and demand might revise in coming months. Long-term outlook for chemical and manufacturing industry looks positive. Even in this situation, we have witnessed 18% year-on-year volume growth in quarter 3 FY '24. And for 9 months of FY '24, we have witnessed volume growth of 17%. This growth is majorly coming from the new products that we commissioned in FY '23, like Epichlorohydrin and CPVC Resin. So our continuous CapEx in previous years have led us to the volume growth and also catering to industry and customer base. This led to be less impacted in this challenging environment. Volume growth in FY '24 is coming from the projects we commissioned in FY '23. Similarly, this year, we'll commission additional capacity of CPVC Resin of 45,000 tonnes per annum, new capacity of CPVC compound of 35,000 tonnes per annum and new capacity of Chlorotoluene value chain. This will drive the volume growth both in FY '25 and FY '26. Our focus on transitioning and diversify our business model has borne fruit as can be seen from the revenue contribution from derivative business and in the 9 months of FY '24. Revenue from derivatives in the Specialty segment contributed 42% versus 27% previous year for similar period. This 42% will further increase and our all-future expansion plans are towards derivatives in the Specialty segment. This diversification helps us to withstand against challenging business scenario, like current times. This diversified expansion strategy benefits is clearly visible in quarter 3 FY '24 on quarter-on-quarter basis, where revenue is almost flat, but marked increase in PAT by 29%. We are focused to do continuous expansion in high-value and high-growth products, strengthening our integrated complex and catering to diversify industry to bring consistent growth in the business. I now hand over the call to Mr. Sanjay Jain, our CFO, who will take us through the financials.

Thank you, Maulik. Let me take you through the financial performance of the company. We witnessed revenue of INR 472 crores in quarter 3 FY '24, against INR 478 crores in quarter 2 FY '24, that is a flat growth for quarter-on-quarter basis, but a decrease of 14% on a year-on-year basis. Revenue contribution from derivatives and specialty business achieved to 42% in 9 months FY '24, against 27% in 9 months FY '23. EBITDA stoodat INR 123 crores in Q3 FY '24, that is growth of 14% in absolute value on a quarter-on-quarter basis. EBITDA margin improved to 26% in quarter 3 FY '24, against 23% in quarter 2 FY '24 on account of increasing overall capacity inflation, higher volume of CPVC and Epichlorohydrin and overall improvement in efficiencies. PAT stood at INR 49 crores in quarter 3 FY '24, that is growth of 29% Q-on-Q basis. PAT margin stood at 10% in Q3 FY 24, against 8% in Q2 FY '24. For 9 months of FY '24, we witnessed volume growth of 17% against 9 months of previous year. The volume growth is majorly from Derivative and Specialty segment. Overall capacity utilization of the plant stood at 81% on quarter 3 FY '24, against 77% of quarter 2. For trailing 12 months, as on 31st December 2023, the return on capital employed stood at 18%. This is after considering the capital work in progress, ignoring the same, the return on capital employed stands at 21%. Our net debt stood at INR 944 crores as on 31st December 2023 versus INR 853 crores as of 31st March 2023. Thus, net debt increased by INR 81 crores as company has incurred cash outflow of INR 323 crores for capital expenditures backed by strong cash flow from operations. In Q3 FY '24, the company has redeemed preference share of INR 30 crores and have outstanding at INR 120 crores as on 31st December 2023 compared to peak of INR 211 crores. Our net debt to EBITDA has stood at 1.96x in quarter 3 FY '24, against 1.83x in quarter FY '24. We were able to maintain this ratio even in this challenging business environment and continued expansion. The net debt equity of the company also stood at 0.8x in quarter 3 FY '24, which was 0.85x in quarter 2 FY '24. With this, we can now open the floor for question-and-answers. Thank you.

[Operator Instructions] First question comes from Priyank Chheda from Vallum Capital.

My question is on the margins for derivatives, if you can share for Q3 and Q2? And also what would be the rough margins that derivatives would have made on 9 months basis?

So margin, as you would see that we have made a margin of 26% for the Q3 FY '24 EBITDA margin. And again, current quarter and considering the 9 months, the chlor-alkali is bit on a lower side and the derivatives is bit on a higher side that's where we are -- the strategy of diversifying is actually playing us, and we are balancing our EBITDA margin. But again, that is the current situation. And actually, we are not sharing the segment-wise EBITDA margin even for quarter or 9 months.

Okay. So it's a request since we have been diversifying our strategy from chlor-alkali to derivatives. And given the derivatives are improving on the margin front, it would be as a good corporate practice, it would be greater -- it would be good if we share on a total derivative basis, we're not asking for an individual chemistry. It will give us a better picture and a better evaluation criteria. So just a suggestion on that.

Yes.

The second question is Epichlorohydrin, if you can help us with, we are looking towards a ramping up of our utilizations. What are the current utilizations? And how much are you confident to grant this number in the FY '24?

So the capacity utilization for Epichlorohydrin, which was like last quarter in the range of 40%, 45% that has gone up to around 55%, 60%. And again, that will improve on from the Q4 onwards. So we are in line with what we had estimated in terms of ramping up of Epichlorohydrin capacity.

Got it. We did see the CPVC compounds capacity, which is getting added. If you can help us, what are the realization spread and the industry dynamics on CPVC compounds? Would it be similar to kind of a CPVC Resins that we're planning for?

So CPVC compound, as you would -- I mean we have announced the capacity of around 35,000 tonnes per annum. So as you would be knowing, the CPVC Resins goes into CPVC compound and CPVC compound will be ultimately used to make the pipes. So -- and when we started selling CPVC Resin, we saw there is a market for the CPVC compound as well for our customers. So that's why we entered into it. And in terms of the margins if you put either -- I mean, even when we sell the CPVC compound, the margin remains in the same range. So it's not that something great or even on the lower side, it will be in the same range what we would have earn on the CPVC Resin. So that remains intact. And market, if we talk about the CPVC compound market is also growing in line with the CPVC pipe market. So that's where we see the potential for to sell this product as well. So it's a combination. We can sell the full CPVC Resin. And if the demand comes for the CPVC compound, we can sell that as well. So it's open for us what to cater to market.

Sure. And just to clarify, [indiscernible] on this CPVC Resins capacity is an independent capacity which is ready for month-end sales. And CPVC compound even over and above the CPVC Resins, which you would not be having any intersegment sales, correct?

No, it's a forward integration of CPVC Resin. So basically, if we make -- for example, if we make 75,000 tonnes of CPVC Resin and we sell everything in the market, so then there is nothing for the CPVC compound. But if you make CPVC compound, then the resin required to make the CPVC compound will be coming from the CPVC Resin.

And ratio would be roughly 1:1?

No, it's roughly around 0.8.

0.8 of resins is required to make 1 unit of compounds, correct?

Yes, that's right.

Yes.

Got it. And just a last question before I come back on the queue. You did mention that overall pricing on the derivatives has bottomed or has slightly -- the reduction that we have been witnessing in the prices has now reduced. Do we see in overall, all the derivatives wherever we are present in across the chemistries, has the pricing bottomed out? What are the signs that you're looking towards the bottoming out of the prices or in case if you want to highlight, are there any derivatives where you are witnessing further more pressure coming up from the China?

So looking at the current energy cost of chlor-alkali, we feel that this is all the derivative prices almost bottom out in the last quarter -- in the third quarter. Now we see some positive sign. Going forward, market is also improving, and we see the positive impact is coming from quarter 4 onwards. So I think initially, we were in the chemical -- we were expecting that H2 will be better compared to H1 will be the worst in the chemicals since last 15 years. And we feel that, that was extended 1 more quarter up to quarter 3. And probably from quarter 4, we are seeing some positive sign in terms of the recovery of the demand or started moving the inventory at least.

And that's equally applicable towards the chlor-alkali also, right?

Yes. Yes. Yes, definitely because if the Derivatives and Specialty segment will improve, definitely the major portion on customers for the chlor-alkali segment in the eastern part of India is all chemical companies. So definitely, textile has already improved, as I mentioned in the last couple of months. It has already improved to almost 90%, 95% it has recovered after Diwali. And other segments also, we are seeing it will start moving up from January, yes.

Just a last question, data entry point on what was the utilization for chlor-alkali? Last quarter, it was around 75%.

So it is, again, in the range of around 70%, 80% kind of thing.

[Operator Instructions] Next question comes [ Balkrishna ] from [indiscernible] Investments.

I have some broad questions like strategic questions. So basically, if I look at India in terms of PVC production, so a lot of maybe 50% of that is getting imported and 50% kind of is being produced in India, correct me if I'm wrong. So my question is like some of the big players who are making PVC. So why would not -- why they are not thinking about making CPVC also?

So first of all, the CPVC is not like a PVC kind of technology, which is available openly for setting up the plant. This is one first requirement. So you need to invest, you need to find out, you need to do some R&D also in-house in terms of engineering also, in terms of chemistry also. So it is not openly available technology for setting up a plant. This is one reason. And the second reason, the PVC and the CPVC, both are completely different technology. It is not something related to the PVC kind of molecule, which is ready-made technology, which is available from the different sources. And the capacity which you mentioned, yes, it is right, 40% of the capacity, I think, of the PVC requirement of India is produced in India, 50% is imported. The major reason is the ethylene, the petrochemical source, which is required to manufacture the PVC, where PVC is the last priority compared to polyethylene, which is the first priority in terms of the investment because of the higher IRR and higher returns compared to the CapEx. So that's why also ethylene goes majorly into the polythene rather than the PVC molecule in India, because growth in every resin and domestic demand is growing in every sector in India. So there is a demand growing in polyethylene also and there is a demand growing in PVC also. That's why PVC is always lag behind in India, and it is dependent mostly on the import basis.

Okay. And about the ECH, so what is the -- in terms of tonnes, like what is the consumption in India currently?

Yes. So current consumption of ECH in India is roughly around 85,000 tonnes to 90,000 tonnes by end of this year. And we are expecting in next 2 years' time, it will be almost -- it is going to be 180,000 tonnes, which is almost double than what is today, because a lot of expansion is going on in the epoxy resin side and other replication side also in India. And everybody has announced their plan, and their plant is under construction for setting up epoxy resin or other applications. And we are expecting in 2 years down the line, it will reach to almost around 180,000 tonnes per annum capacity of Epichlorohydrin in India.

And there was some anti-dumping duty application was filed by you for ECH. So do you have any update on that?

No, that's the [ protocol ] so I don't know how much time it takes in the government. And so nobody is having any idea about that part. But in terms of Epichlorohydrin, in terms of epoxy resin, the consumption of India is growing very fast because majorly it is used in the 3-growing segment of India, where the domestic demand is growing. One is automobile, second is infrastructure and third biggest is the construction sector. So all 3 sectors is growing very fast. Sorry, third sector is windmill, renewable energy. So all 3 sectors is in a high-growth path in India. And we believe the numbers what we are mentioning right now about 180,000 or 160,000 tonnes consumptions of Epichlorohydrin in 2 years down the line will achieve earlier than what we are expecting.

Okay. And last question. So in the last conference call, I think I understood that you were also exporting ECH, right?

Yes.

So in this regard, I have a question that since we -- you are the first who is producing ECH in India, and now you are also exporting whereas a lot of people might be importing also. So what is causing this like thing? Is this a price or what are -- what is the reason for this?

See, there are multiple reasons. One is definitely the price. Another is everybody would like to keep 2 or 3 vendors in their approval list. People cannot depend on one particular vendor. So this is the major reason, yes. But as domestic capacity available, we believe that going forward, the domestic preference will be on the higher side going forward, because it is a lot of logistical challenge in the current scenario to import in such a bulk raw material, which is liquid where the storage of the raw material is also a challenge. So as the capacity is increasing in India, we believe that domestic vendors will be the first [indiscernible] supplier side going forward.

Next question comes from Riya Mehta from Aequitas Investments.

Sorry, if my questions are repeated. I just joined the queue late. My first question is in terms of caustic. So basically, what is the current realization at the capacity utilization for caustic?

Current realization for the caustic would be in the range of 31,000, 32,000, and the capacity utilization is around -- for the Q3 is in the range of 78%, 80%.

78%, 80%. And this would be majorly coming from a normal sector or if there is any particular sector, which is outgrowing others?

It is well diversified. It's not specific to any -- going in specific segment. It's well diversified.

And I think last year, we were seeing a lot of increase in both the caustic and [Technical Difficulty] Europe. So how are things going there? Are we still exporting on mainly because of the geopolitical issues, the shipping has been an issue to Europe. So what is the scene there?

No, no. It's -- right now, the situation in Europe is completely reversed. It is in the worst situation and all the companies in Europe [indiscernible] so most of their plants are running at 60%, 65% level because of the high energy costs and the downstream demand. So there is no additional demand coming from the Asia for the export. So there is no opportunity, at least in this current scenario from India or any other countries to European region.

Are we exporting caustic also?

No, we are not exporting. We are selling to easter part of India to the customer from time to time. But we are not exporting right now.

And what is the trend of the realization currently? Like are we seeing this getting consolidated at these levels, I think since, I think, a couple of months now?

Yes. So currently, the realizations have been in this range even in the situation when the demand is bit under pressure and even if there is a supply -- I mean, there is a good amount of supply in the market. So we believe the current range which we have is kind of a bottom out and things might stay at this level or improve down the line.

Got it. And in case of the raw material, what is the current cost of power?

So in terms of the energy, the prices have been, you can say, come down a bit, but it has not gone to the level of pre-COVID levels. So it has gone down, but not to the extent of the drop in the realization of the chlor-alkali. So that's where there is a bit of pressure on the chlor-alkali margin, you can say, for this year. So that's what it has to be. I won't able to share the exact price of the per unit cost.

Okay. Got it. And in terms of [indiscernible] what would be the realization currently?

Sorry?

ECH realization?

ECH?

Yes.

You're asking Epichlorohydrin or caustic soda realization?

Epichlorohydrin, ECH.

So Epichlorohydrin realization has been in the range of around 1 lakh to 1,05,000.

Okay. And the other player who [indiscernible] ECH capacity will be coming up soon. So do you think there will be a glut and that will lead to lower realization?

See, in -- what you have said is right, the other capacities will be coming. But as earlier in the early comments, Maulik sir just informed, the way the epoxy manufacturers are increasing the capacity and the way demand is growing in India, the current demand of ECH, which is around 90,000 tonnes per annum, which will reach to around 1,20,000 maybe next year, in 2 years' time, it will reach to around 1,80,000 tonnes per annum. So that's where any new capacities that will be coming will be absorbed, plus we are already -- our products are well approved by the customers. We have already established market for us in Europe and the U.S. So we are in a much better position in terms of serving the customers. So even if the new player comes, that I guess the demand which is growing will absorb the supply that will be coming.

And what will be our export percentage in ECH predominantly?

It's around 30% to 35% as of now.

Next question comes from Mohit Sharma from [ Prime Wealth ].

First of all, congratulations for good set of numbers. And I just have 3 questions. What is your current ECU realization in Q3 versus Q2?

Sorry, realization for Q3. The ECH realization for Q3 is about 27,000, 28,000 as of now.

27,000, 28,000. Okay, sir. And how much we consume chlorine in-house?

So currently, with the expansion that we did along with expansion in the chlor-alkali, our chlorine consumption in-house is rages in the range of 65%, 70%. And as this year we will be commissioning the additional capacity of CPVC Resin and the [ chlorotoluene ] so that will further consume chlorine that will be coming from the chlor-alkali plant. So it been a matter of [indiscernible] we anticipate that reach around 85% of chlorine consuming in-house.

And while consuming the chlorine, do we have the byproduct HCl, or it is entirely chlorine consumption?

Sorry, I didn't get the question. Can you repeat?

Yes, it is in the form of chlorine and HCl both, some of the products we used at HCl some of the product we used at chlorine itself. But yes, as [indiscernible] has mentioned, we will consume 85% of the chlorine whatever we produce in 1-year down the line and our [indiscernible] expansion and the chlorotoluene will be streamlined -- chlorotoluene project also will be streamlined in next 6 to 9 months' time.

Okay, sir. And do we sell hydrogen also? And if we sell hydrogen, do we include the same in the calculation of ECU?

No, hydrogen sell is additional, but additional -- than the ECU. But hydrogen, we are selling also and hydrogen we are consuming in the hydrogen peroxide also. So we have both -- the application of the hydrogen is in the both -- both the -- and product also has a downstream product also.

And how much we sell out of our total product, sir, if we have number available, like 40%, 50%...

So we are selling around -- roughly around 40,000 to 50,000 meters cubes per day.

[Operator Instructions] Next question comes from Shubham Upadhyay from the MicroCap Minute.

And most of my questions have been answered. So I have just one quick small question. I'm sorry if it is a repeat question. So I've been going through the investor presentation and the project update, which you have given, 2 of the projects are very close to completion, like 85% and 90%. So can we expect some contribution from these particular projects into the top line in this quarter?

No, no, no. I don't think so. This is -- so by end of fourth quarter, it is going to be completed. So we are not expecting any of the revenue will come from the existing financial year.

Okay. And another CapEx you have mentioned is like INR 47 crores. Will that be spent in this particular quarter itself?

Yes. Yes. So that is an estimate, but yes, it will be spent in this quarter.

Okay. And any more CapEx planned for next financial year?

Every year, we have a continuous CapEx. So generally, it will be ranging around INR 300 crores to INR 350 crores, 1 year can be here and there. But yes, definitely, we will be doing continuous CapEx for the growth.

[Operator Instructions] We have a follow-up question from Riya Mehta from Aequitas Investments.

My question is in regards to CPVC Resin. So currently, what kind of utilization levels are we at and the realization?

So currently, the CPVC utilization is around 85% and the revenue which we are getting is roughly around INR 140 kind of average, yes.

Okay. And [indiscernible] expecting on the Q4, the newer capacity to come up, when would we expect the ramp-up of the incremental capacity?

I think that you can expect optimum level we are expecting by end of H1 next financial area, yes.

H1?

Next financial year, optimum capacity we'll reach by that time, yes.

H1 FY '25, right. And could you elaborate on the CPVC compound the application? And how is it different than how is the entire chemistry?

So basically, CPVC Resin is not what we make. So after CPVC Resin, 1 makes CPVC compound. And then from CPVC compound, pipes and fittings can be made. So that's where we have forward integrated into the CPVC compound as well to cater to all kind of customers that are there in India.

Right. So basically, we'll use captive CPVC for our CPVC compounds?

Yes.

And...

Yes, 80% of the customers are based on resin and 20% customers, they prefer to have a compound directly. So we don't want to miss out those customers, and that's why we have set up this plant for the compound, yes.

Okay. So post this commissioning of the compound, how much percentage of the resin would be used for capital consumption?

So that we have capacity, which we have built 35%, but I don't -- we will be utilizing at least 50% kind of thing by the end of H1 next financial year, yes.

Okay. It would be higher margin [indiscernible] resin.

No, no, no.

It is Slightly higher in terms of margins, we are -- yes, compared to -- because this is a value addition and 1 step forward integration, yes, it is slightly better margin than the resin. But yes -- but it's not big difference, yes, because there is no much -- it's a very simple process. It's not a complicated process.

Got it. And in terms of our other products like are we -- [Technical Difficulty] is kind of realization?

Sorry, I didn't get your question.

Chloromethane and hydrogen peroxide, what are the realizations like and utilization level? I think last year, we were almost at around 100%. So just wanted to know...

So that stands even for this quarter in both chloromethanes and hydrogen peroxide. And the realizations would be, again, in the hydrogen peroxide, it is somewhere around INR 25,000, INR 26,000. And in terms of the CMS, it will be somewhere around INR 30,000, INR 32,000.

We have a follow-up question from Priyank Chheda from Vallum Capital.

Yes. My question is on [indiscernible] so if you can help us with how long is the customer approval, we understand that it goes into as an intermediate for pharma and agro and CEMO applications. So how are we on the customer approval front? And if you can help us on the further, what would be the kind of value addition product that we would -- that we are thinking where are we on that?

Yes. So chlorotoluene, yes, it is majorly going into the pharma and agro customers. And I think we are targeting 50% of the domestic market and 50% of the export market. So domestic approval will come very fast compared to the export approval. So we are expecting initial sales will generate from the domestic vendors. And going forward, all the approvals we'll achieve, probably it will take 6 to 9 months' time for the export customers at least to get an approval. But we will by end of FY '25, we are expecting to reach more than 60% of the capacity of the chlorotoluene including the derivatives or including the specialty products, which we are going to add as a further capacity.

And sir, how different is our chemistry. With respect to the capacity of chlorotoluene which has been getting added by [indiscernible] Gujarat [indiscernible] how are we different in that if you can answer with that?

Chlorotoluene is a simple word where people are using for many different ways. But this is a completely different chemistry and first time in India, where this facility which we are doing it. The facility, which [ RTS ] announced also the similar, but I think [ GSCL ] is announced, it's a completely different chlorotoluene, which is not in line with what we are going to do it and [indiscernible] is going to do it. Yes.

So you mean that given the varied application of chlorotoluene over 15,000 tonnes is dedicated towards a very specific kind of application where our competition is not adding any capacity. Is my understanding correct?

Yes. Right now, I think we are the first one and the same I think that they -- yes, we are the first ones in India, and no one is adding the capacity right now at least the [ GSCL ] is not doing it. [indiscernible] we don't have status of the project. But yes, so we are the first one right now in India, and nobody else has the similar chemistry from India.

So is this product getting imported today, which we would be replacing the imports or is it a new market that we are developing?

So it is -- right now, this product is completely imported from China or Japan or in Europe. So nobody else is manufacturing. So a lot of custom manufacturing companies who are buying this raw materials from other -- from China, Japan and Europe. So we believe that this market is going to increase in next 5 to 10 years' time and that completely as a Make in India. People don't need to depend on other part -- the third part of the country. And on the multinational who are in agro or pharma, they also believe -- and they also need a complete value chain from -- and a second option other than the China country, people need completely value -- entire supply chain from Make from India. So we are going to be support this path and to all the specialty chemical company in India. Yes.

Got it. And if you can help us just how much of this product is getting imported in India as on date, where we would be adding 15,000 capacity? So then we get to how much of the replacing as a import substitution?

So this product in last 5 years, it has a major change. It is not something very huge market. This is a niche kind of thing. And year-on-year, the volume is increasing because custom manufacturing companies in India, they are also increasing and the people also they are handling their molecules to Indian companies for their customer manufacturing. So volume year-on-year, it is increasing of this kind of chemistry. So this is a bundle of the products where 10 to 15 products, which 10 products out of all we are targeting only the 10 products in the first phase. And going forward, we are going to do value addition and we might add further steps in the ad-hoc chemistry from this. But this is going to be in the future, not now. Now right now, we are focusing on the first phase, but there are 10 different kind of products are there out of entire chlorotoluene and value chain, yes.

So if I have to get more clarity on this, the 10 product that we are manufacturing is the exact size of -- kind of an import? So 15,000 tonnes would be getting imported for this 10 products, which we would be completely replacing it. And once this replacement is done in next say, by FY '25-'26, we would then again go for a further value-add product, which are again also getting imported?

That's right. That's right. That's right.

Got it. Sir, on a -- I have another question on the long-term capital allocation thoughts. So given that we have been ending our very large capacity additions in last 2, 3 years, we have almost been spending INR 400 crores to INR 450 crores for the last 2, 3 years per annum. How do we think about strengthening our balance sheet further, given that we have a INR 1,000 crores kind of a debt, what are our debt reduction plans if you can also help us with what would be the free cash flow allocation that we would think of?

See, considering the current debt that we have all put together is around INR 940 crores working capital and the long-term debt. So that is the peak debt that we have that debt will down the line might reduce from here on because the CapEx that we are doing completing this year, and that will again start contributing cash flow from the next year. We'll be having a good amount of cash flows for -- doing the CapEx in the range of INR 300 crores, INR 350 crores and also paying a part of the debt. So I'm not saying that debt will go fully, but that amount, what we have right now is at its peak. Like, for example, in the current year itself, if you look at the debt that we have, our debt has been increased from 31st March to 31st December, it has been increased by INR 80 crores, whereas we have spent a CapEx of around INR 323 crore. So the INR 250 crores of CapEx that amount we have spent is coming from the internal accruals. So that is from -- and again, in the year, which is totally down as of now. So this project recommission plus the other CapEx that we will get commissioned this year, that will start showing a good amount of cash flows to fund the CapEx also and also in terms of paying off the debt.

So overall, our balance sheet size will increase. The debt in absolute terms will remain almost similar level to meet the requirements of future cash flow of -- future expansion and future CapEx.

Okay. Okay. So what I've understood is in a full perfect year where there is -- where all the capacity will get commissioned, we would have a -- somewhere cash flow of around INR 500 crores-odd give and take some percentage points over here.

Yes, that's right.

Of this, what would be -- so we would continue with INR 300 crores, INR 350 crores of CapEx every year. Is that the understanding that we should build in?

It could be around INR 300 crores. See -- again, see, once we put the project, every phase has a different out of cash flow. Cash flow outflow is different at a different point of time. But [Foreign Language] you can consider around INR 300 crore of CapEx that could happen. But what you said in terms of the cash input from the cash flow from operations will be around INR 500 crores. So after that INR 300 crores would be the CapEx, the balance can be used to pay dividend and to reduce our debt.

Okay. Okay. And how much would be the term loan out of INR 940 crores and what are the repayment schedules for that?

Presently, with the debt of INR 944 crores, around INR 640 crores is a long-term debt.

And what other repayment schedules for this?

Yes, it's around 3 to 3.5 years as of now from this, except 1 loan, which has been recently availed.

So yes, so 650. So every year, we have a repayment schedule of around INR 180 crores, so that's around 3.5 to 4 years. And also just to point to that, we have a redeemable preference shares in our books that also we have reduced from INR 150 crores to INR 120 crores.

Okay. Okay. Got it. And what would be -- roughly what maintenance CapEx per year?

Maintenance -- the plant, which are old assets that will be around kind of -- 2% kind of thing and the new assets must be having around 1.5% kind of thing, yes.

We have a follow-up question from Mohit Sharma from [ Prime Wealth ].

Sir, do we -- you told me the EC was around INR 27,000, INR 28,000. Do we include flex or lie in the EC calculation?

It's a combination of both.

Okay. Combination of both. And sir, our data [indiscernible] I can see that there is a drop of around 40%, 45% in the EC prices, so when do you expect the market will be back to normal or there will be some increase in the prices, or this is a new normal?

See, currently, the realizations are around in the range of INR 31,000, INR 32,000. And again, it's difficult to give you a number then when it will go up and to what extent. But considering the current situation, we feel where we are standing in terms of the realizations, it is bottom out. So it might improve, but when, again, it's anyone's guess.

Okay, sir. And for the other projects, which consume the chlorine, we transfer at the market price or internal price, let's say, [indiscernible] price or something? Because if I'm aware correctly, chlorine currently is running negative.

Yes. So chlorine that we consume in-house in the other products where we consider that as a market price.

Market price. Okay, sir.

[Operator Instructions] We have a follow-up question from [ Balkrishna ] from [indiscernible] Investments.

My question is to Maulik. In some earlier conference call, you have mentioned that consumption of CPVC in India is kind of close to 50% of the global consumption that's if I did not understand -- I mean, if I understood it rightly. So can you tell me why is this like the 50% figure? I mean, there is a very huge and it is consumed in India and not outside.

Yes, it is true. See, CPVCs introduced in India is in 2004. And in terms of development of the infrastructure and speed up process, it started in India, I think after almost China has developed and everything there is the last lay. And so every other country, they've used PPR as a pipe application for the hot water pipe application, where PPR is there and CPVC for the hot water pipe application, it is easy to handle and easy to install. So plumbers are feeling much better in terms of handling this product and installing this product in India. And that's why it has picked up very fast in India, and that's why the volume in terms of CPVC Resin, it is going up drastically from 2004 onwards, at least 10% to 12% minimum in a year-on-year basis. And that's why it has reached to 50%. And other countries, they have established their plumbing, installation and other things based on the PPR. So that's the major difference why India has picked up CPVC for the hot water pipe application compared to other countries. And going forward, we believe like country like U.S., Korea and Japan and even China, for fire and sprinkler application also, they use the CPVC as a resin, and that is not yet started in India, still people use and approval has not yet come from the authority. So in the going forward, we believe that the Indian authority will also change the specification for the fire and sprinkler application and the CPVC Resin application will go up in this application as well. So we are expecting by 2030, the India's volume of CPVC Resin will reach to almost 5 lakh tonnes in India. So it is -- I think it is driven by more plumber flexibility and installation. I think they have driven the growth of CPVC in India.

Okay. And 1 last question. So considering the current financial year so far is going and the way it is going. So whatever guidance I think you have given for like -- for the medium term maybe '26 or '27. So are we making any changes to that guidance in terms of revenue or EBITDA or something like that?

Yes. So this -- yes, the guidance which we have given, yes, it might be not exactly the same number, but it might be plus or minus 10% or 15% kind of thing from that level, yes. Because at that point of time, what kind of the product price will be. But our CapEx, everything is we are doing it based on that keeping the number in target where we can achieve those numbers in next 3 years' time, yes.

We have a follow-up question from Priyank Chheda from Vallum Capital.

For continuing on the discussion on the capital allocation. So Maulik, sir, when we think about adding further new -- more new chemistries, and we have been witnessing that as company has been progressing from 75% chlor-alkali to now, it would go below 35%, say, in next 1 or 2 years. And when we say that we would be -- we've been planning for INR 300 crores, INR 350 crores of CapEx spending, what are the kind of chemistries that we should think of in the derivative side going ahead? Would it be the similar -- would it be the existing chemistries where you think there is a huge scope to add, or would there be a new chemistries that we would -- that we are working on it?

So -- yes, there are mix of this. So we can do the existing chemistry as well as the new chemistry also we are exploring. So that's why we have started R&D center near in Ahmedabad. And there, we are working, so first phase, what we are going to establish that everything is over in the R&D, and now we are doing establishing quarter 4, all the plants and all the products will be commissioned by end of quarter 4, it will be commissioned. But the new chemistry, we have started working in our R&D, and that is going on. So it is new chemistry also it is there as well as the existing chemistry, which we know that is also there. But what is our asset is available and what is our strength, that is our first priority. And we wanted to play around those chemistry. If we might need to add some more chemistry around that, we will add more chemistry. But our core focus will be the capacity, which we already have right now in the first phase.

If you can quantify in terms of what would be the minimum asset turns that we look forward, if we want to venture into any other new chemistry or based on the prices at that point of time, what are the kind of IRR returns that we think of when we have -- when we are deciding -- when we are penciling down the new CapEx spend, if you can help me on that?

So based on today's scenario, if any chemical companies would invest in a specialty chemical kind of multipurpose kind of plan. The CapEx to turnover ratio, I think it is going to be mostly around 1.4 to 1.5 maximum based on today's scenario of the capital cost and all the commodity prices, yes.

Got it. And in chlorotoluene, which as you said, that we're looking forward for first end products, where we are doing a 15,000 tonnes of capacity, what would be the follow-on CapEx in case we have to go towards value-add segment, what would be the kind of a size and CapEx requirement that would be required?

Look, in the chlorotoluene and the derivatives side, even if you want to do a 1 block, it is not more than of INR 200 crores kind of thing in 1 block. So I don't think it is much more CapEx or it's a big size CapEx is required for that kind of chemistry.

And the size would be simpler to kind of a 15,000 tonne size?

So this is going to be the value addition. So yes, you can say roughly around -- not 15,000 tonnes, this is -- the 15,000 tonnes is a major block, but yes, close to around 10,000 tonnes kind of thing, yes.

And so all the further addition within chlorotoluene should come at significantly better return on capital, even it would have a far better realization and it would not be kind of a greenfield requirement. So within existing facility, this should result into better return ratios. Am I correct?

So I would say, yes, it is correct once we reach to optimum level of the plant capacity because initial time, I think it is on the lower side. So once we reach optimum side, I think it is -- you are right that we can get a better realization from this product range.

And to achieve company-level EBITDA margins on the newer chemistries, what is the kind of utilization that we should think that after the minimum level, what is that minimum threshold that we would achieve a company-level margins on the utilization front?

So utilization front, under the optimum, what we consider is around 75% for the plant that we have -- 75% to 80% for the current plants that we have. And compared to the chlorine kind of plant, I think it is more than 50% kind of thing, I think it is -- we can achieve.

And breakeven levels would be around 30, 40?

Sorry?

Breakeven is achieved at 30% to 40% utilization levels?

I didn't get it.

Breakeven. Again, see -- there is -- I mean, in this, there is nothing like a such a breakeven point of view. But yes, if the capacity utilization has dropped to below 50% or you can say 40%, then again, it depends on plan to plan, but then the margins will definitely go down or it will be kind of a breakeven. But if it is higher than that, you can earn a better margin, like in our case of the -- currently what is the situation.

But you can expect when we do any project, we are considering from 25%. We always be kept in mind. Definitely, it depends on the market scenario or demand scenario, which may differ here and there. But we always keep in mind that the 25% ROCE, when we do any kind of project, yes.

There are no further questions. Now I hand over the floor to management for closing comments.

Good evening. I would like to convey that long-term story of India remains intact and current situation is short term. And looking at the Indian consumer story, we are positive about long-term outlook, and we are working towards that through our future expansion and diversification in terms of multiproduct catering various industries, we are targeting consistent growth both at top line and bottom line. I'd like to thank you for joining us here today. Please feel free to reach our IR if there are still any unasked questions. Thank you, everyone, for your participation.

Thank you. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day.